Power Company Owns a 70% Controlling Interest in the Shelton

question 7

Essay

Power Company owns a 70% controlling interest in the Shelton Company.Shelton regularly sells merchandise to Power, which then sells to outside parties.The gross profit on these sales is the same as sales to outside parties.On January 1, 2019, Power sold land and a building to Shelton.Twenty percent of the price of the real estate was allocated to land and the remaining amount to structures.Additional information for the companies for 2019 is summarized as follows:
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$\begin{array}{lcc}& \text { Power } & { \text { Shelton } } \\\text { Sales } & \$ 2,250,000 & \$ 1,500,000 \\\text { Cost of goods sold } & 1,850,000 & 1,050,000 \\\text { Operating expenses } & 320,000 & 240,000\\\\ \text { Internally generated net income } & \$ 860,000 & \$ 435,000 \\ \text { Intercompany merchandise sales } & & 200,000 \\ \text { Intercompany inventory, end of year } & & 50,000 \\ \text { Intercompany inventory, beginning of year } & & 40,000 \\\text { Book value of real estate sold } & 150,000 \\\text { Sales price for real estate } & 220,000\\\text { Depreciable life of buil ding }&&14 \text { years }\end{array}$ Prepare income distribution schedules for 2019 for Power and Shelton as they would be prepared to distribute income to the non-controlling and controlling interests in support of consolidated worksheets.
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Definitions:

Machine-Hours

A measure of the amount of time machines are operating in the production process, often used to allocate manufacturing overhead costs.

Markup

The amount added to the cost price of goods to cover overhead and profit, calculated as a percentage of the cost.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders and is typically based on direct labor hours, direct labor costs, or machine hours.

Machine-Hours

A measure of production activity that quantifies the amount of time machines are used to produce goods.